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HIDDEN TENDER

2014

MONITORING REPORT OF PUBLIC PROCUREMENT IN KOSOVO

JANAR-DHJETOR 2014 - RAPORTI I MONITORIMIT TË PROKURIMIT PUBLIK NË KOSOVË

CONTENT:

01 04 06

INTRODUCTION

METHODOLOGY

LEGAL FRAMEWORK

07 39 40

MONITORED CATEGORIES

CONCLUSIONS

RECOMMENDATIONS

JANUARY-DECEMBER 2014 MONITORING REPORT OF PUBLIC PROCUREMENT IN KOSOVO

ACRONYMS Acronyms ACA – Anti-Corruption Agency CPA – Central Procurement Agency BIRN – Balkan Investigative Reporting Network KIPA - Kosovo Institute for Public Administration KDI- Kosovo Democratic Institute PPRC – Public Procurement Regulatory Commission KSC – Kosovo Security Council MPA – Ministry of Public Administration MLGA – Ministry of Local Government Administration MEST – Ministry of Education, Science and Technology MAFRD - Ministry of Agriculture, Forestry and Rural Development MoJ – Ministry of Justice MoD – Ministry of Diaspora MF – Ministry of Finance MSF – Ministry of Security Force MI – Ministry of Infrastructure MEI – Ministry of European Integration MCR – Ministry for Communities and Return MCY – Ministry of Culture, Youth and Sport MESP – Ministry of Environment and Spatial Planning MIA – Ministry of Internal Affairs MFA – Ministry of Foreign Affairs MLSW – Ministry of Labour and Social Welfare MoH – Ministry of Health MTI – Ministry of Trade and Industry MED – Ministry of Economic Development PRB – Procurement Review Body REC - Regional Environmental Centre for Central and Eastern Europe RTK- Radio and Television of Kosovo FH – Ferizaj Hospital PS – Prison Services

CS – Cadastre Services KCS- Kosovo Correctional Service MHSF – Mental Health Services - Ferizaj MHSGj - Mental Health Services - Gjilan MHSGjk - Mental Health Services - Gjakova MHSM - Mental Health Services - Mitrovica MHSP - Mental Health Services - Peja MHSP- Mental Health Services - Prizren MHSPr - Mental Health Services - Prishtina MHSSh - Mental Health Services - Shtime KJCS – Kosovo Judicial Council Secretariat CECS – Central Elections Commission Secretariat RHGjk – Regional Hospital, Gjakova RHGjl - Regional Hospital, Gjilan RHM - Regional Hospital, Mitrovica RHP - Regional Hospital, Peja RHPz - Regional Hospital, Prizren VH – Vushtrri Hospital KPST - Kosovo Pension Savings Trust UPM – University of Mitrovica “Isa Boletini” UP – University of Prishtina “Hasan Prishtina” UPe – Public University “Haxhi Zeka”-Peja UPz – University of Prizren AOMN – Administrative Office of Mitrovica North OAG – Office of the Auditor General OPM – Office of the Prime Minister of the Republic of Kosovo FMA – Frequency Management Office OP – Office of the President of the Republic of Kosovo ERO – Energy Regulatory Office

JANUARY-DECEMBER 2014 OPERATIONS

MONITORING REPORT OF PUBLIC PROCUREMENT IN KOSOVO

Introduction Under the auspices of the project for monitoring of public services and public funds spending, the Balkan Investigative Reporting Network, BIRN, has monitored the announcements of public contracts in all the public institutions of Kosovo. Monitoring was followed by further research and reporting of the key findings immediately after the cases were disclosed to media. This report is a summary of findings for 2014. It contains the most significant cases of suspected misuse of public funds through public procurement. The report addresses this cases, offering conclusions and recommendations for the improvement of the issues it identifies. Monitoring of public money spending through public procurement is of crucial importance. Such a process can identify irregularities in the content as well as technical, procedural and administrative aspects so that improvements can be made. The report also presents the cases when contracting authorities awarded public contracts to companies that are considered non-responsive, or which are owned by trusted people of powerful politicians, friends or family members of procurement officials and the like. During 2014 procurement was characterized with awarding of public contracts to people close to mayors and procurement officials. The year included the notification of a single-source tender without competition to an

American company for building Kosova e Re, and revelations that the former US Ambassador to Kosovo, Christopher Dell, was hired by Bechtel, the American firm that was constructed the Kosovo highway. Apart of being contracted for constructing the highway that connects Kosovo with Albania, Bechtel&Enka in 2014 started working on a second multimillion euro tender in Kosovo for the highway that will connect Kosovo and Macedonia. The Kosovo Government, namely the Ministry of Infrastructure, decided to once again contract the American company Hill International, led by former Bechtel employees, as the supervisor of construction work. Furthermore, R&Rukolli company, which is owned by Rrustem Rukolli, the coordinator of Sami Lushtaku’s security team, was awarded with tenders worth millions of euros not only by the municipality of Skenderaj, but also at the central government level by the former government. On the other hand, a company owned Kapllan Nikqi, who supported LDK in the 2013 elections, was awarded tenders at the Municipality of Peja, which is led by Gazmend Muhaxheri. The Procurement Office of this municipality is led by Xheme Berisha, who faces two indictments on suspicion of misusing the tenders. In the Municipality of Suhareka, the brother of the procurement official was also awarded a tender.

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The report also presents some cases of contracts where competing companies offered bids many times higher than the winning one, such as in Lipjan, where the price was 65 times higher; in, Mitrovica, where it was five times higher; in Vushtrri, where it was 13 times higher; at the KUCC, where it was 14 times higher; four times higher at Termokos; and seven times higher at Infrakos The report also discloses the negotiated tenders that are of large value, avoiding open procedures and harming free competition, such as in the case of iPad procurement by the Assembly of Kosovo. Furthermore, fuel supply tenders, as a very complicated and problematic field, have been analysed Supply companies set ridiculous and unreasonable premium pricing. For example, although the Kosovo Police has denounced a company of fraud and damaging of its budget at the value of 150,000 euros, it awarded the tender to the same firm in 2013. During the monitoring, it was also noted that legal vacuums in the procurement system leave room for manipulation of citizens’ taxes in fuel supply tenders, the same as in all other tenders where the lowest price is the criterion for awarding with contract.Besides that these tenders can result with poor quality of provided service, such practices can also lead to

damaging of Kosovo’s budget. As a consequence, a considerable number of cases that are related to tendering procedures are under investigation by prosecutors, or under legal scrutiny. Public procurement is among the most criticized fields in the reports of local and international organizations, including civil society and media. One of the most important institutions of the European Union, which Kosovo aims to join, has given heavy criticism. The EU’s Progress Report has stressed the importance of Kosovo being committed to preventing corruption in public tenders. The 2014 Progress Report published by the European Commission concludes, “Corruption remains prevalent in many areas, including in public procurement, and continues to be a serious problem that needs to be addressed urgently. The report Commission concludes that this problem needs to be addressed on the political level.

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“Real political commitment is needed to translate efforts into actual results in the fight against corruption. There also needs to be further strengthening of inter-institutional cooperation.1” Accountability and transparency needs to be improved and corruption needs to be effectively addressed,2” the Progress Report states. In her annual address, Kosovo’s President also delivered criticism about the procurement system in the country. She concluded that public procurement in Kosovo is nontransparent.3 These institutions and organizations have continuously demanded from the institutions to administer the procurement process in a responsible, transparent and accountable manner, and promote equality between economic operators to ensure healthy and impartial competition. BIRN’s report contains findings from monitoring of 168 contracting authorities, which have 1 2014 Progress Report on Kosovo. 8 October 2014. http://www. mei-ks.net/repository/docs/Final_20141008-kosovo-progressreport_en_(2).pdf 2 Ibid. 3 Office of the President. Transcript from the annual speech of the President at the Assembly of Kosovo. 18 December 2014. http:// www.president-ksgov.net/?page=1,8,3664

been grouped into these main categories: municipalities, Independent Institutions, Public Enterprises, Government of Kosovo with all of the individual ministries, Office of the Prime Minister, Assembly of Kosovo and Office of the President. By providing concrete recommendations, BIRN aims to contribute to the improvement of the public procurement process, increase of accountability and responsibility toward the taxpayers, with fair and efficient spending of public money. Recommendations for the public procurement process to be implemented fairly, legally and efficiently are addressed to decision-making institutions for the development of legislation that regulates this field and institutions that spend public funds through tenders. BIRN’s findings draw attention about the urgent need for human and technological capacity building in the procurement sector. This would enable adequate implementation of priorities, plans and strategies that institutions have themselves put forward.

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METHODOLOGY Public procurement monitoring was done through a combined methodology that used the analysis of current legislation and studies published by local and international organizations. Simultaneously, monitoring of tender announcements published at the official website of Public Procurement Regulatory Commission was done, as was an analysis of dossiers of specific tenders were the key points of this process. Apart of this, the official website of the Public Procurement Review Body was also consulted for the announced decisions. Opinions given regarding disputable tenders were analysed at the Anti-Corruption Agency. Special attention was also paid to monitoring of court sessions directly related to the procurement sector. Knowing the importance of their classification, BIRN focused and analysed the way that public contracts were classified by Contracting Authorities. Based on the Law on Public Procurement, public contracts are grouped according to their values, thus being categorized into large, medium and small contracts.4 Large value contracts are considered to be supply contracts the estimated value of that is equal to or greater than EUR 125,000, while 4 Law on Public Procurement in Kosovo. 29 August 2011. Pg. 24-25. http://www.kuvendikosoves.org/common/docs/ligjet/Ligji%20 per%20prokurimin%20publik.pdf

the works contracts are equal or greater than EUR 500,000.5 Meanwhile, a medium value contract is considered a supply contract or a service contract the estimated value of which is equal to or greater than EUR 10,000, but less than EUR 125,000. While, estimated value of a work contract is equal to or greater than EUR 10,000, but less than EUR 500,000.6 Meanwhile, a low value contract is considered any public contract with an estimated value that is equal or greater than EUR 1,000, but less than EUR 10,000.7 With the intention of analysing public contracts, BIRN has followed announcements published by the contracting authorities in the official website of PPRC, according to categories presented as in the following:

5 Law on Public Procurement in Kosovo. 29 August 2011. Article 19.1 6 Law on Public Procurement in Kosovo. 29 August 2011. Article 19.2 7 Article 19.3 of the Law on Public Procurement

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Tab 1 Published procurement announcements 1 January-31 December 2014 In order to be able to confirm the disputable information further through a number of sources, BIRN held interviews with officials of respective institutions, interviews with private companies, and it has analysed materials that it got hold of through requests for access to public documents. BIRN has also monitored the articles and documents published in the media related to the cases followed during this reporting period (January-December 2014).

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LEGAL FRAMEWORK This Report of Procurement Monitoring has been drafted within the legal frameworks set by the legislative system of public procurement in Kosovo. The public procurement process in Kosovo occurs under the primary legislation, namely the Law on Public Procurement; and the secondary legislation that includes bylaws, such as directions and internal work regulations, of the relevant stakeholders such as the Public Procurement Regulatory Commission, Central Procurement Agency, and the Procurement Review Body. The Law on Public Procurement entered into force on 5 October 2011. As of this date, the Kosovo Contracting Authorities are obliged to implement the Law on Public Procurement No. 04/L-042 for all the procurement activities. Meanwhile, the Law on amending and supplementing the Law no. 04-L-042 on public procurement in the Republic of Kosovo entered into force on 20 March 2014. Amendments in supplementing this Law are related to implementation of provisions of Article 1 in line with deadlines set by the Stabilisation and Association Agreement. The other amendment is related to the advantage in tender for local bidders, which is added as a point of Article to the old law. This enables local companies to be announced as tender winners, under the condition that the difference of the final amount between the local companies is not higher than ten (10) points compared to foreign companies.8 While as far as the secondary legislation is concerned, it includes the following bylaws: - Operational guideline on public procurement of the PPRC9 - Work regulation of the Central Procurement Agency 10 - Work regulation of the Procurement Review Body11

8 Official Gazette of Kosovo. https://gzk.rks-gov.net/ActDetail.aspx?ActID=9425 9 Public Procurement Regulatory Commission. http://krpp.rks-gov.net/krpp/PageFiles/File/draftLS/Shqip/Udhezues%20Operativ%20per%20 Prokurimi%20Publik.docx 10 Central Procurement Agency. https://aqp.rks-gov.net/sq/organizimi 11 Procurement Review Body. http://oshp.rks-gov.net/repository/docs/Rregullorja_WEB_1.pdf

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MONITORED CATEGORIES BIRN has monitored 168 contracting authorities that carried out public procurement activities during 2014. Monitoring was extended in two levels of state government, concretely at the local and central level. The local level includes 37 municipalities, while the central level includes 19 ministries, 82 independent institutions, 27 public enterprises, the Office of the Prime Minister, Assembly of Kosovo and Office of the President.

MUNICIPALITIES Through processing public procurement documents, which were published on the PPRC website, tenders of 37 municipalities of the country were analysed. Tenders were analysed from the very process of contract announcement, by which it is called on economic operators to compete in the tender, tender awarding and cancellation, cancellation prior to publication of the announcement for awarding the contract, up to cancellation by the PRB after the announcement for awarding of the contract.

Tab 2 Number and percentage of published announcements

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In some cases, published announcements were cancelled prior to publication of the announcement for contract awarding, whereas it was noted that out of 1,387 contract announcements in total, 428 of them or 23 per cent were cancelled prior to their awarding. Cancellation was based on the following reasons: a) Non-responsive tenders12 – in 185 cases the cancellation was done with the justification that economic operators have presented non-responsive tenders. b) Opinions of the Anti-Corruption Agency – ACA’s opinion was mentioned as the reason for cancellation in four cases. However, in its website ACA has published 17 opinions for Kosovo municipalities by recommending cancellation of procurement procedures. In 13 cases, when the contracting authorities’ announcement for cancellation was made, it was not mentioned that the action was taken because of ACA’s recommendations. Three opinions from ACA were cited the Municipality of Prishtina as the reason for cancelling tenders. 13 The municipality of Hani i Elezit has also mentioned ACA’s opinions as reasons for cancellation.14

12 According to the Law on Public Procurement, non-responsive tenders are considered those that are not in compliance with a) the tender dossier, including technical and contractual requirements, b) requirements of relevant legislation of Kosovo or that are c) otherwise incapable of meeting the requirements of the contracting authority as specified in the tender dossier. Law on Public Procurement, pg. 7. http://www.kuvendikosoves.org/common/docs/ligjet/ Ligji%20per%20prokurimin%20publik.pdf 13 Anti-Corruption Agency. http://akk-ks.org/repository/docs/opinion%20K.Prishtines-dpkpp.pdf 14 http://akk-ks.org/repository/docs/opinion-%20Hani%20i%20 Elezit%20.pdf

c) Lack of detailed filling of standard forms – detailed reasons for tender cancellation are not mentioned in 104 cases. In the form it is noted that cancellation was done due to violations of the law on procurement, without giving detailed explanations. Public institutions are obliged to give detailed reasons at the end of each form. In cases when there is no sufficient information and in order to have a rather real picture on the reasons of cancellation, BIRN has sent requests for access to public documents in 18 municipalities of Kosovo, asking more detailed information. Eleven out of 18 municipalities in whose addresses the requests for access to public documents were sent responded back explaining that cancellations happened due to non-responsive tenders. d) Substantial excess of budget – in 70 cases, tenders of economic operators have exceeded the planning and budgetary capacities of municipalities. Detailed data on public procurement at the local government have been presented in the table below:

Tab 3 Number and per cent of published cancellations

JANUARY-DECEMBER 2014 MONITORING REPORT OF PUBLIC PROCUREMENT IN KOSOVO

During the monitoring it was noted that municipal authorities have published more contract awarding announcements than contract announcements on the PPRC website. This has happened because contracts with low quotation levels are not subject to publication procedure as calls for tenders, but they are only published as contract awarding. This has resulted with publication of a total of 2,450 contract-awarding announcements, which reach the value of 90,391,728 EUR for the period of January-December 2014, according to the table below:

Lack of approximate value of contracts When it comes to contracts, BIRN has noted that there are cases when price per unit was presented, but not also the amount, which makes accurate calculation of the contract’s total value impossible. This phenomenon was particularly noted with framework contracts, a finding that corresponds with the PPRC 2013 report, which demonstrates that institutions have not avoided these problems that continue to appear.17

Tab 4 Classification of contracts by value From the table above we note that 50 per cent of tenders awarded in municipalities of Kosovo are of medium value and that 69 per cent of the forecasted procurement budget is expected to be spent to cover them. Meanwhile, the other part of funds are planned to be spent on small and big contracts. This type of contracts is not monitored by the PPRC as the latter lacks human capacities to cope with the work volume.15 Municipalities announce large value projects only in cases when a project co-funded with the relevant ministry is adopted. 16 15 Interview with Safet Hoxha, Chairperson of Public Procurement Regulatory Commission, 30 November 2014, Prishtina. 16 Abdyl Limani, expert at the Public Procurement Regulatory Commission, e-mail communication, 11 November 2014

17 This report states that it is impossible to specify the value of framework contract as these contracts are mainly signed with price per unit. Nonetheless, we can conclude that their value is high as these contracts are mainly related to supply and services, while they reach a considerable amount in procurements done in Kosovo. http://krpp. rks-gov.net

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Municipality Drenas Ferizaj Gjakovë Istog Kaçanik Kllokot Ranillug Shtime Shtërpce

Number of contracts without specified value 1 1 3 1 1 2 1 2 2

Tab 5 Municipalities with contracts without values Thus, in 33 cases divided as per the table above, while contracting services and supplies, municipalities have not presented the total value of framework contracts per length of services, but they have only presented monthly amounts. 18 According to Article 26 of the Regulation on Public Procurement, paragraph 2, even if the exact amount that will be spent is not known, framework contracts must define an approximate value. So, such cases potentially can be at the benefit of the economic operator and to the prejudice of the budget, because when the amount is not specified than the products’ price is higher. Lack of an appropriate calculation is a serious violation of tendering procedures.19 This phenomenon is a result of poor budgetary and procurement planning, non-respect of the medium-term expenditure framework and lack of transparency in spending public funds, as is the creation of room for misuse of public funds. Non-publication of the approximate contract value was repeated from last year, as it was also noted in the audit reports of municipalities for 2013. Such cases were noted in Prizren (23 cases)20 , Lipjan (19 cases) 21, Ferizaj (16 cases)22 , Rahovec (12)23, Decan24 and Shtime25 (3 cases each), Junik26 , Skenderaj27 , Shterpce 28 and Gjakova29 (2 cases each). This phenomenon has resulted with lack of sufficient funds that led to re-destination of funds from different budgetary categories, consequently damaging other projects. Re-destination of funds from a planned project to another happened in Fushe Kosove30 and Podujeve31 with six projects each, Klina32 and in three cases in Vushtrri.33 18 These contracts are mainly related to maintenance and physical security, office material supply, transport of people with special needs, etc. 19 Interview with Abdyl Limani, expert at the Public Procurement Regulatory Commission, Prishtina, 11 November 2014 20 Office of the Auditor General http://oag-rks.org/repository/docs/RaportiAuditimit_KPZ_2013_Shqip_772263.pdf 21 Ibid. http://oag-rks.org/repository/docs/RaportiAuditimit_KLIP_2013_Shqip_542446.pdf 22 Ibid. http://oag-rks.org/repository/docs/RaportiAuditimit_KFE_2013_Shqip_384613.pdf 23 Ibid.http://oag-rks.org/repository/docs/RaportiAuditimit_KRA_2013_Shqip_984289.pdf 24 Ibid. http://oag-rks.org/repository/docs/Report_and_Audit_report_ALB_-_Final_800147.pdf 25 Ibid. http://oag-rks.org/repository/docs/RaportiAuditimit_KSHT_2013_Shqip_783184.pdf 26 Ibid. http://oag-rks.org/repository/docs/11_Report_JUNIKU__me_raport_auditori_bashkengjitur_-_ALB1_337056.pdf 27 Ibid. http://oag-rks.org/repository/docs/1_Report_Skenderaj_me_opinionin_e_auditorit_bashkengjitur_-_ALB_709065.pdf 28 Office of the Auditor General. http://oag-rks.org/repository/docs/RaportiAuditimit_KSH_2013_Shqip_591119.pdf 29 Ibid. http://www.oag-rks.org/repository/docs/RaportiAuditimit_KGJ_2013_Shqip_48225.pdf 30 Ibid. http://www.oag-rks.org/repository/docs/RaportiAuditimit_KFK_2013_Shqip_313023.pdf 31 Ibid. http://www.oag-rks.org/repository/docs/RaportiAuditimit_KPD_2013_Shqip_440527.pdf 32 Ibid. http://www.oag-rks.org/repository/docs/4-_Report_KLINA_me_raport_auditori_bashkengjitur_-_ALB_Final_199779.pdf 33 Ibid. http://www.oag-rks.org/repository/docs/RaportiAuditimit_KVU_2013_Shqip_610256.pdf

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Higher price vs. lower price

Politics and procurement

Another suspicious element in procurement is contract awarding of private companies that compete with very low prices. We have noted such cases in the municipalities of Mitrovica, Lipjan and Vushtrri. For the Regulation of the Economic Zone tender, the Municipality of Mitrovica awarded the contract to the economic operator that had the offer of EUR 39,800 value, while the highest price in the tender was EUR 198,000, which is five times higher than the winning price. The Municipality had planned to spend EUR 260,000 for implementation of this project. 34 For the traffic signs placement tender, Lipjan awarded the economic operator that asked EUR 90 for completing this work, while the highest price was EUR 5.881 that is 65 times higher than the winning price .35 A similar case was also in the municipality of Vushtrri, where for the tender for building the protective wall in Miraq village, the municipality signed a contract with the company that offered the price of EUR 9,351, while the highest price was EUR 124,159 that is 13 times higher than the winning price. 36 In relation to this, BIRN contacted with the municipalities of Mitrovica37 and Lipjan38 , which were surprised by the extremely low prices of the winning bidders. Nonetheless, the lowest bidder was awarded in both cases.

Extension of political influence in the public procurement remains one of the main concerns. During the monitoring, BIRN has noted that businessmen close to politicians have been empowered and awarded through public tenders. The municipality of Skenderaj favoured “R&Rukolli”, a business owned by Rrustem Rukolli, the coordinator of Sami Lushtaku’s security team, with its headquarters in Skenderaj. Over the years, The business won over EUR 5 million from the municipality led by Lushtaku, and also managed to win over EUR 15 million from other public authorities in Kosovo under PDK’s leadership. Gazeta Jeta ne Kosove reported that in June 2013 the auditor found that Ministry of Infrastructure signed a contract with R&Rukolli, while project drafting, which based on procurement rules is done prior to tender opening, was done two months after the contract was signed. The auditors also found that this private company lacked a degree-holding civil engineer and a geodesist - criteria according to the tender dossier. At that time, Rukolli denied auditor’s findings. In another case, in the Municipality of Peja, the Deputy Mayor, Shkumbin Gashi, was in the evaluation committee even in the tender that was won by a businessman close to Democratic League in power in Peja. In November last year, Gazeta Jeta ne Kosove found that an inexperienced company in the field of physical security, Energjia, was contracted by Peja local government to guard municipal buildings and it would be paid thousands of thousands of Euros for this service. Kapllan Nikqi, owner of Energjia company, was the LDK supporter during the last year’s elections, which were won by the current Mayor Gazmend Muhaxheri. Nikqi declined to comment on the tender, while Muhaxheri says that the company fulfilled the criteria.

34 Public Procurement Regulatory Commission. http:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=90250 35 Ibid. http://krpp.rks-gov.net/Default. aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=89219 36 Ibid. http://krpp.rks-gov.net/Default. aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=92658 37 Interview with Bekim Beka, Director of Procurement Directorate, Municipality of Mitrovica, 14 January 2015. 38 Interview with Adem Duriqi, procurement official, Municipality of Lipjan, 19 January, 2015

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In the meantime, when TV programme “Justice in Kosovo” demanded explanations from the PPRC, the agency responded the procedure was not in accordance with the Law on Public Procurement. Muhaxheri later said Gashi must no longer be part of these committees. Meanwhile, in the Municipality of Mitrovica, Besnik Beka, who earlier served as an advisor to Mitrovica Mayor Agim Bahtiri, was appointed as director of procurement. Furthermore, both Bahtiri and Beka come from Gushavc village of Mitrovica. 39 Apart of putting the procurement office under the management of a person with political background, during the monitoring it was also found that Municipality of Mitrovica favoured relatives of municipal workers in tenders. Through public tender, a leased apartment was provided to an Italian businessman engaged by the Municipality of Mitrovica to attract foreign investors. Three persons applied in the tender, while the son of a municipal director was announced as the winner. Tender winner on 5 May of this year was Fisnik Berani from Mitrovica, who gets EUR 270 per month – for a year – according the contract between Berani and the municipality. Fisnik is the son of Nexhat Berani, director of internal auditing in the municipality. 40 Concerning this case, BIRN asked the opinion of Anti-Corruption Agency in June 2014, and it only got a response in January 2015, which states that “they have demanded from the Municipality of Mitrovica to take disciplinary measures against certain persons.“ The Mayor of Suhareka municipality was similarly generous to residents of his village. At the end of December 2013, Suhareka did not have a cafeteria to supply the municipality staff with drinks. With the idea that the municipality cannot remain without coffee until 39 Gazeta Jeta ne Kosove. Agim Bahtiri brings his advisor to municipality’s procurement. 19 August 2014. http://gazetajnk. com/?cid=1,1018,8832 40 Gazeta Jeta ne Kosove: The Italian privileged by municipal rulers, 16 June 2014. http://gazetajnk.com/?cid=1,987,8528

the end of tendering procedures; the cafeteria was given to “Miqesia” owned by a person who comes from the same village as Mayor Sali Asllanaj. Only two weeks after the cafeteria was already functional, namely on 14 January, Procurement Office officially announced café bar “Miqesia” owned by Gazmend Zeqiraj of Gjinoc village, as the winner of the tender. Three bidders took part in this tender, while Gazmend Zeqiraj came out as the low-priced one.41 Aside from the influence that is made on Procurement Offices from outside, there are also cases when relatives of the head of this Office are favoured. Brother of the Procurement Official Director won two tenders in the municipality of Suhareka. Municipality of Suhareka published the contract ”Cleaning services – buildings, offices, yard, gym, etc.” at the value of EUR 50,000 for 36 months with the price of EUR 2.49 per unit. This tender was won by “Beni” company in Suhareka, owned by Arben Kuci, who is the brother of Bujar Kuci, chief of procurement of this municipality, who was suspended in January for abuse of official duty. 42 The same company had won a tender in Rahovec for “Cleaning and sanitary maintenance of municipality buildings” at the value of EUR 90,000 with the price of EUR 1.693 per unit. It is not only the municipality of Suhareka that is awarding its relatives with tenders. The municipality of Prizren has acted similarly. The latter announced the tender for decorating the town for end-of-year festivities, which was won by “Elektromontimi”, a firm firm owned by Myzhdat Gjini, at the value of EUR 29,000. 41 Gazeta Jeta ne Kosove: Mayor’s villager takes over café bar, 12 February 2014. http://www.gazetajnk.com/index.php/dosjer/Milioneri%20n%C3%AB%20Politik%C3%AB%20Agim%20Bahtiri,%2053,%20 AKR?cid=1,979,7532 42 Public Procurement Regulatory Commission. http:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=89236

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Gjini is the husband of a municipal official at the Directorate of Urbanism but this, according to municipal officials, cannot be seen as interference in tender awarding. The municipality says that it has selected the company that offered the lowest price. This company had started decorating the towm immediately after the publication of the contract awarding announcement, not waiting to pass the eight-day appeal period at the PRB prior to contract signing, the standard for procurement procedures. 43 BIRN monitoring found that even people who do not have university diploma have high positions in local government procurement offices. In the municipality of Ferizaj, there were issues with qualification of the acting head of public procurement in this municipality, Ilir Beqiri. The PPRC legal interpretation states that: “no person can serve as Official in Charge of Procurement, if the person in question does not possess university diploma and an actual basic or advanced procurement certificate”. 44 Suspicions of corruption in public procurement During 2014 prosecutorial bodies took actions to bring people that misuse funds through public tenders to justice. Several indictments were filed last year. In June 2014, Basic Prosecution in Peja filed an indictment against the head of procurement Xheme Berisha, for exercising his authority on selection of the winner of a tender for physical security of building during 2012, as well as six other officials of Peja municipality, including other procurement officials. 45 An initial hearing has been set for 4 February 2015. Berisha was indicted in a different case in February 2013. 43 Kallxo.com. http://live.kallxo.com/sq/MTL/Prizreni-Dekorohet-pa-uNenshkruar-Kontrata-me-Fituesin-e-Tenderit-3819 44 Kosovapress.com. http://www.kosovapress.com/sq/nacionale/ krpp-jo-zyrtare-te-prokurimit-pa-diplome-universitare-12684/ 45 State Prosecution. Indictment. 26 June 2014. http://www.psh-ks. net/repository/docs/Nr_13.PDF

Berisha is accused of not performing of his official duties in order to illegally materially benefit for another person. He acted, according to the indictment, in contradiction with the Law on Public Procurement during the execution of the contract, which was made on 15 September 2011 between the tender winner for cleaning and maintenance of the facility of the municipal administration, health institutions, educational and cultural ones. The contract was signed with the N.SH.T “Network” with headquarters in Decan, which is led by Kujtim Selmanaj. Selmanaj is accused of “violating rights in labour relations”.46 The initial hearing for this case was held in October 2014. A second session, when a decision is expected to be made about the dismissal of charges, is expected in 2015. During 2014 an indictment was also filed in a procurement case of another municipality. Gjilan Prosecution filed indictment against Shaip Surdulli, former Mayor of Kamenica, a businessman, and two former municipal officials. The Prosecutor concluded that their group misused over EUR 6,000 in a project for “Kriva Reka” river repair. Sadik Thaci, former head of the Procurement Office, Izet Thaci, supervisor of works, and Ali Kastrati, owner of “Besniku” private company, which carried out the works, were included in the indictment. Sadik Thaci and Izet Thaci are accused of misuse of official duty, while the businessman Ali Kastrati is accused of increasing the work volume in contradiction with the initial calculations. This indictment was filed on 3 January 2014, while the court hearing regarding this case is expected to be set during February 2015. In another case, Basic Prosecution in Gjilan, Serious Crimes Department filed an indictment on 31 December 2013 against Xhevat Bislimi and Abdullah Emini, suspected of the criminal offence “misuse of position or official authority”.

46 State Prosecution. Press release. February 2013.

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According to the indictment, Bislimi, in the capacity of Viti deputy mayor and Abdullah in the capacity of public procurement official, on 26 January 2009 misused their official positions and authority by not respecting regular tendering procedures, with the aim of obtaining illegal assets at the value of EUR 3,028 for the designing office “Geodezy – Projects” owned by Feriz Sinani from Viti. In 2014 this case was assigned to Emine Salihu, Judge of the Serious Crimes Department, and the trial hearing is expected to be set during 2015. At the same time, six other officials of this municipality; Daut Xhemajli, Avdullah Emini, Sabri Sherifi, Tahir Lubishtani, Ridvan Ademi, and Musa Hasani also have an indictment filed against them for misuse of official position or authority by violating the rules on public procurement, while they were officials of Viti Municipality in 2009. They are accused of signing works contract at the value of EUR 7,936 with “Kristal” company from Viti, which was to implement the works - “repair of sidewalks and decorative trees in Viti”, damaging the municipality’s budget. 47 Prosecution has also targeted Suhareka municipality. The indictment includes Agim Bylykbashi, collector of municipal taxes, Ramadan Kuqi, the person in charge of administrative works, Avni Tafolli, official at the Education Directorate, and Bujar Kuqi, head of Public Procurement in Suhareka. The three first ones are accused that in contradiction with the Law on Public Procurement they have recommended to procurement manager to award the contract to the non-responsive economic operator, Sh.P.K. ‘’New Design’’ from Prishtina. This company did not have professional staff and did not mention provision of legal services for which it was contracted in its business activity. Bujar Kuqi, head of Public Procurement in Suhareka is part of this process because he signed the contracted.48 47 State Prosecution. Press release. February 2013 48 Koha.net, Basic Prosecution in Prishtina files indictment against Xhevat Bislimi. 7 January.

This case is being tried at the Serious Crimes Department of Prizren Basic Court.

At the beginning of January 2015, Mayor of Suhareka Municipality, Sali Asllanaj, suspended the head of procurement, Bujar Kuqi, and three municipal officials .49 Prizren officials have also been targeted by the prosecution. The Serious Crimes Department at the Prizren Basic Court has filed a new indictment against the Director of the Municipal Education Directorate, Nexhat Cocaj, and two teachers of this municipality, Bekim Thaci and Bedri Cejku. Nexhat Cocaj is suspected of misusing EUR 61,303 on behalf of the celebration of “Remzi Ademaj” week, as the head of Organizational Committee. Cocaj is accused of issuing invoices to suppliers without tendering procedures, of having withdrawn money from the credit account, which were allocated by the Prizren Municipal Assembly in different values, without knowing the destination of public money. At the same time, “Bogdani” firm, owned by Cocaj himself, also was a recipient of money. 50The case is expected to be proceed at the Serious Crimes Department of Prizren Basic Court.The case of four Obiliq municipal officials started in November 2014, at Prishtina Basic Court. They are accused in the Prishtina Basic Court – Serious Crimes Department of allowing the owner of “Ardi” company to illegally benefit from a contract by being paid for work that was not carried out in a park. They are accused of misuse of duty or authorization in interaction. They are accused of issuing written reports that that work had been done as planned in the contract when they were aware that this was not true. In the following session held in December, lawyers of the defendants have presented their objections against the indictment. The Court has ruled that it will decide about defenders’ objections in writing within an unspecified timeframe. 49 Gazeta Jeta ne Kosove. Former deputy minister does not feel guilty. 30 April 2014. http://gazetajnk.com/?cid=1,1018,8126 50 Kallxo.com http://live.kallxo.com/sq/MTL/Shtyhet-ShqyrtimiFillestar-Kunder-Zyrtareve-Komunale-te-Suharekes-3677

JANUARY-DECEMBER 2014 MONITORING REPORT OF PUBLIC PROCUREMENT IN KOSOVO

Fuel supply While monitoring publication of contracts in institutions, BIRN has found that a segment of public procurement is prone to misuse. The manner of supplying fuel to public institutions at the local as well as the central level leaves room for taxpayer money to be misused. Different authorities purchase fuel (diesel and gasoline) at different prices, depending on the offers that each authority individually takes. According to a research of Gazeta Jeta ne Kosove, the Central Procurement Agency has failed to do any centralized procurement, although it assumed this mandate in October 2011 with the changes done to the Law on Public Procurement. Nonetheless, aside from preparing of a list of seven articles/items that this Agency can do procurement in, it did not manage to implement this. 51 According to Mursel Rracaj, executive director of the Central Procurement Agency - CPA, “this Agency cannot do centralized procurement procedures until a list is approved by the Ministry of Finance, which includes supply with fuel, burning material, IT equipment, vehicle service and similar.” Although the list was submitted to the Ministry of Finance, they still have not received the approval. 52 In May 2014 Rracaj told Gazeta Jeta ne Kosove that he still has not received a response for his request submitted to Ministry of Finance then addressed to Besim Beqaj of the Democratic Party of Kosovo (PDK). At that time, Ministry of Finance did not respond to Gazeta Jeta ne Kosove, either, when it was asked why the list with articles that would be tendered through centralized procurement was not approved. Nonetheless, CPA contracted fuel for 37 contracting authorities at the centralized level in May 2014. 51 Gazeta Jeta ne Kosove. Sali Asllanaj suspends head of procurement in Suhareka. 9 January 2015. http://live.kallxo.com/sq/MTL/ Sali-Asllanaj-Suspendon-Shefin-e-Prokurimit-te-Komunes-4008 52 Kallxo.com. http://live.kallxo.com/sq/MTL/Skandaloze-Ja-Per-CkaAkuzohet-Nexhat-Cocaj-ne-Aktakuzen-e-Re-3687

This followed the request of these 37 contracting authorities, while the approval from MF was only taken only for these authorities, but not also for other articles in the abovementioned list. Winner of this tender was HIB Petrol Company with the contract of the value of EUR 13,850,000 with EUR 0.026 price premium per litre of diesel and EUR 0.0159 price premium per litre of gasoline for the three-year period. The Ferizaj company was awarded the winner after cancellation of the tender by the Procurement Review Body. Initially, Petrol Company was announced as the winner of this tender. PRB concluded that the tender needed to be cancelled as the licence for the company’s fuel station in Gjilan had expired. Fuel price is calculated according to global exchanges, along with transport costs, customs, excise and finally the premium. Premium is the company profit, whereas each competing company sets its price in the tender. While reading the contract signed between the CPA and HIB Petrol, a remark was made about determination of the premium price, which says that no more than four numbers are accepted decimal places.53 Nevertheless, BIRN has noticed that diesel supply tenders carry various premium prices, even with 5 decimal places, as in the table below:

BIRN contacted the economic operator HIB Petrol, which acquired the contract from PRB for 37 contracting authorities for three years, amounting EUR 13,850,000. 53 Gazeta Jeta ne Kosove. Failure of central procurements. 27 May 2014. http://gazetajnk.com/?cid=1,987,8333

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No.

MUNICIPALITY

DIESEL PREMIUM

GASOLINE PREMIUM

1

Fushë Kosova

0.00491

0.000001

2

Kllokot

0.11

0.115

3

Lipjan

0.055

4

Malisheve

0.09

0.09

6

Podujeve

0.60

0.60

7

Prizren

0.1559

0.1559

8

Viti

0.134

0.095

9

Vushtrri

0.09

0.09

10

Ranilug

0.11

0.11

12

Shtime

0.02

0.02

14

Gjilan

0.0001

15

Hani i Elezit

0.12

0.09

16

Rahovec

0.01

0.009

17

Suhareka

0.000099

18

RWC Hidridrini Pejë

0.258

19

Bifurkacioni Ferizaj

0.10

20

RWC Hidromorava Gjilan

0.11

0.12

21

Termokos

0.225

0.225

22

UP

0.30

23

Pensions Saving Trust

0.09

24

Mental Health Service Mitrovica

0.302

25

TAK

0.095

26

Kosovo Property Agency

0.0799

27

Kosovo Competition Authority

0.0912

28

Independent Mines and Minerals Commission

0.116

29

Financial Intelligence Unit

0.07

30

Kosovo Judicial Council Secretariat

0.138

31

Mental Health Service Shtime

0.001

32

Vushtrri Hospital

0.0001

33

Gjilan Hospital

0.00599

34

Mitrovica Hospital

0.0021

Tab 6 Premium prices

0.119

0.09

0.001

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Fatbardh Xhaferi, HIP Petrol accountant, told BIRN that “fuel prices are based on global stock exchange which changes on daily basis, thus many factors drive the calculation, such as methods of transportation, quantities and specific requests of various organizations and clients, geography (mountains or plain), distance to the client, and so on”. This company was also contracted by the municipality of Fushe Kosove. Because of this, BIRN contacted Fushe Kosove municipality regarding its fuel supply contract with abnormally low price. Municipal officials justified that “the municipality is obligated to respect the public procurement law and contract the lowest bidder”. Failure to respect this requirement, according to the municipality, would result in cancelling the tender by the PRB”. No economic operator has filed a complaint to PRB in the past five years against Fushe Kosove municipality.” 54 BIRN contacted the Petrol Company’s economic operator, Fatos Shala, accountant of the company, according to whom “since the Law on public procurement does not provide for number of decimal places, bidding companies provide various premium prices, sometimes even ridiculous ones, just to be the lowest bidder”. “This makes us, the company, to bid with such prices only to avoid losing the tender. However, according to him, tendering of fuel for all institutions (contracting authorities) by PRB would harm free market competition, thus awarding one single company.55 Petrol Company has addressed this issue to the PPRC, requesting to amend the law and identify the number of decimal places. However PPRC responded that current law does not prevent, nor does it define this issue. Thus, holes in the Procurement Law, which does not prevent this practice nor they define this issue, allow fuel companies to compete 54 Interview with Mursel Rracaj, executive director of the Central Procurement Agency, 30 November 2014 55 Premium per liter may be noted in maximum 4 decimal places. Any decimal after the fourth shall not be considered in calculating the bid value.

with abnormally low prices, just to win the competition. Acquiring profit-free tenders is regarded an alternative route by fuel companies in profiting from public contracts. This is reflected in the fuel supply contract for Kosovo Police by HIP Petrol bidding 0.00 premium (no profit) in 2009. Thus, the State Prosecutor filed the indictment against Fatbardh Xhaferi, HIB Petrol official. He is accused for harming Police budget for EUR 150,000. He was accused because the company handed-in a profit-free bid, thus manipulated the transportation price, presenting inaccurate information to the Kosovo Police. Indictment states that Kosovo Police paid EUR 150,000 more as compensation for transportation expenses to HIB Petrol. Despite this, HIB Petrol has been contracted again by Kosovo Police in 2014 for supplying fuel under a framework contract for 36 months in forecasted amount of EUR 3,500,000. This company has encountered problems with Prishtina Municipality, too. In October last year, Prishtina Municipality, announced a fuel supply tender for Prishtina schools. The lowest bidder was HIB Petrol. However the municipality cancelled this procurement process with the justification that the concerned company has fraudulently during past years provided schools with heating oil, not diesel, as provided by contract, for which Prishtina Municipality filed a criminal report. 56 However, HIB filed a complaint to the Procurement Review Body, demanding the case be reassessed, but there has been no Court decision. 57 However, according to PPRC in principle “while a company is not sentenced by any court and is not in the black list of operators, it is entitled to sign contracts with any Contracting Authority”. 58

In another case, Skenderaj Municipality includ56 Interview with Bedri Obertica, procurement official in Fushe Kosove municipality, 4 November 2014. 57 Interview with Fatos Shala, accountant in Petrol Company, 20 January 2015 58 Municipality of Prishtina. 27 October 2014. http://kk.rks-gov.net/ prishtina/News/Ngrohja-ne-shkolla.aspx

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ed other supplies in the fuel tender awarded to “Alfa Trade” company. Irrespective to the fact that tender relates to fuel supply; it also included windshield wash fluid, antifreeze, and engine oil, among others. According to the municipality, this occurred because of an urgent need and lack of sufficient bids by economic operators. However, according to contract rules, such contracting should have been done in lots, due to different prices and use. 59 INDEPENDENT INSTITUTIONS Independent institutions include total of 82 contracting authorities, including justice bodies, health services, education institutions, Police, Customs, tax administration, independent agencies, and others. The following announcements were published during 2014:

Tab 7 Number and percentage of published announcements Thus, 1,835 contract award announcements were published on the PPRC website amounting to approximately EUR 101,354, as per the following table:

59 Procurement Review Body. http://oshp.rks-gov.net/repository/docs/vendimet/2014/Furniz-me-nafte-dhe-derivate_.pdf

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Tab 8 Classification of contracts by value By number of publications, independent institutions lead with small number of contracts with 62 per cent while large contracts lead by value with 76 per cent. Cancellations were done based on the following reasons: a) Non-responsive bid - 395 cancellations have been based on nonresponsive tenders by economic operators. b) Opinions of Anti-Corruption Agency - 3 cancellation cases refer to the opinion of ACA, however ACA on its website published 21 opinions to independent institutions recommending cancellation of procurement procedures, namely PPRC website does not contain 18 such opinions. c) Lack of detailed completion of standard form- 112 cases of cancellation do not specify the reasons. The form states that cancellation results due to violations of the Procurement Law, with no detailed specifics of violated articles. Contracting authorities at the bottom section of the form shall provide detailed reasons for the tender cancellation. d) Substantially exceeds the budget - in 37 cases, tenders were cancelled because bids of economic operators exceeded the budget of contracting authority.

Tab 9 Number and percentage of cancelations published

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BIRN noticed 22 cases of announcements by independent institutions with no forecasted value of the contract. See table below: PUBLIC OWNED ENTERPRISE

NUMBER OF CONTRACTS WITH NO AMOUNT INDICATED

Archive agency

1

Customs

1

Police

2

Office in the north

2

Independent civic council

1

Family medicine centre

1

Judicial council

1

Ferizaj Hospital

2

Vushtrri Hospital

1

KFVA

1

Legal Aid Commission

1

Blood transfusion centre

2

Prishtina Emergency Centre

1

KCUC

1

Prizren Hospital

1

Gjakova mental health

1

Gjilan Hospital

1

UP

1

Tab 10 Number of contracts by independent institutions with no amount indicated

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Forecasted contract amount is absent mainly in building maintenance service contracts,60 travel services61, building insurance62, internet services63 and fuel supply64, supply with medical goods and equipment66, supply with required workplace equipment65 , supply with groceries66 and the like. Contracting of services in US Dollars Public institutions are obligated to indicate the tender amount in Euros. Use of other currency constitutes a violation of the Law on Public Procurement. While monitoring the independent institutions BIRN found that Kosovo Police had published the award of “Access to stock exchange” contract, in amount of USD 19,700.67 Suspicious tenders of public institutions In its tender “Supply with printing material” the University Clinical Centre contracted a private company with extremely low bid. Price in the contract is EUR 9,708, while highest bid was EUR 141,053, or 14 times higher. 68 Tender call of this contract indicated that it is a medium size tender, while contract price of under EUR 10,000 makes it a small contract. 69 60 Interview with Abdyl Limani, expert in the Public Procurement Regulatory Committee, 10 November 2014. 61 2.2 If the contract is divided into lots, each lot can lead to the award of a separate contract. The quantities given for the different sections will be inseparable. The bidder should provide the total quantity or quantities for each section. Should the bidder win contracts for more than one section, a single contract may be developed, covering all such sections 62 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=88663 63 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=94259 64 64Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=88663 65 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=88361 66 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=89265 67 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=90578 68 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=87568 69 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=87568

Another institution facing problems with tenders during the year was the Central Election Commission. Procurement Review Body found that the Central Election Commission committed a violation in the tender “Public information on early 2014 elections”, and fined it EUR 350.70 The decision of PRB came after the complaint filed by “Entermedia” company on 22 May with the justification that CEC awarded the contract to “MDA” although they offered higher bid. “Entermedia” also complained to PRB regarding the form and content of tender dossier they received. PRB also found that contract with MDA was signed only by one administrative official, not by the CEC chairperson, as required for large contracts. Suspicious about tendering in independent institutions regarding also include the Kosovo Police. HIP Petrol company got the diesel supply contract for Kosovo Police for 2014, despite the fact that HIB Petrol was facing trial, whereby one of its senior officials is accused of fraud. This tender amounts EUR 3,500,000. Kosovo Police provided a justification for awarding a large contract to a fuel company that was accused of fraud by the KP. Police stated that the company met the required criteria from the tender dossier, while its compliant bid was the lowest. This shows that Kosovo Police instead of filing a petition to PRB to blacklist this company because of fraud, on the contrary, awarded it a contract. There is another tender of Kosovo Police that raises suspicion on abuse of public funds. A vehicle tender initiated in 2011 has not been concluded even during 2014. Because of suspicion of price fixing in tender, Peugeot requested its representative in Kosovo not to hand-in a bid in Kosovo Police tender. Porsche Kosova Company offered a bid for a Skoda Rapid of EUR 18,317, while this company sells the same car for EUR 10,950.71 70 http://oshp.rks-gov.net/repository/docs/vendimet/2014/Informpublik-zgjedhjet.pdf 71 Kosovo Democratic Institute: Study case on vehicles of Kosovo Police, 14 February 2014

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PUBLIC ENTERPRISES Publicly owned enterprises are managed by board of directors elected by the Assembly of Republic of Kosovo or the Municipal Assemblies, managing policies and finances of enterprises.72 Central and regional public enterprises are supervised and monitored directly by the Ministry of Economic Development, as representatives of the owner (Kosovo Government). Regional public enterprises are municipal property, and sometimes they are property of a number of municipalities. 73 BIRN has monitored tendering processes of 27 contracting authorities, which have published 2,562 announcements including contract announcements, cancellation announcements, contract award announcements and design competition announcements.

Tab11 Number and percentage of published announcements Compared to municipalities and independent institutions, public enterprises have a large number of cancellations before contract award announcements, respectively out of 1,087 contract notices, 340 or 31 per cent were cancelled. This is because public enterprises issue large tenders with specific tendering terms, due to nature of work and specific supplies they use (KEK, PTK, waste collection and water supply, etc.). The cancellation reasons are: a) Non-responsive tenders74 – in 126 cases or 37 per cent of them, cancellations were done because of non-responsive tenders of economic operators. 72 Law on Publicly Owned Enterprises. http://www.gazetazyrtare.com/e-gov/index.php?option=com_content&task=view&id=164&Itemid=56&lang =sq 73 Office of the Auditor General. http://oag-rks.org/repository/docs/RaportiVjetorAuditimit2013_Shqip_272851.pdf 74 According to public procurement law, non-responsive tenders are considered all tenders that are not in compliance with a) the tender dossier, including technical and contractual requirements, b) requirements of relevant legislation of Kosovo or that are c) otherwise incapable of meeting the requirements of the contracting authority as specified in the tender dossier. Law on Public Procurement, p. 7. http://www.kuvendikosoves.org/common/docs/ligjet/Ligji%20per%20prokurimin%20publik.pdf

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b) Opinions of Anti-Corruption Agency – An opinion by ACA has been pointed out as the reason for cancellation of 4 tenders. ACA has published 13 opinions75 on its website on public enterprises recommending cancellation of procurement procedures. Public enterprises do not cite the ACA opinion in nine cases as reason for cancellation in the form published in PPRC website. c) Lack of detailed completion of standard forms – In 121 cases of cancellation the reasons for cancelling notices are not specified. The form indicates that the cancellation came due to violation of the procurement law, but no further details were provided. Contracting authorities are obligated to provide details on cancellation of tendering activity. d) Substantial excess the budget - in 41 cancellation cases, contracting authorities stressed that bids of economic operators exceed the budget of the enterprise. Detailed information has been presented in the following table:

Tab 12 Number and percentage of published cancellations Total 1,098 award announcements, amounting to approximately EUR 149,121,937 have been published on the website of PPRC during January - December 2014, according to the table below.

Tab 13 Classification of contracts by value 75 Anti-Corruption Agency. http://akk-ks.org/?cid=1,1180

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Large contracts account for 86 per cent of all contracts tendered by public enterprises. Unlike municipalities and independent institutions, large contracts of EUR 125,000 to 500,000 for supply and services and work contracts over EURO 500,000 are the dominant tenders. This happens because these independent institutions have included large capital investments for providing services to public. During 2014, PTK and KEK had most expenses through procurement procedures. Lack of approximate contract value BIRN has noticed absence of approximate contract value at announcements of public enterprises which tend only to note unit prices or pre-qualified companies in 14 notices. Among others, these contracts are related to phone services (KEK76 and ‘Pastrimi’ Prishtina77 ), for various supplies (two PTK78 and three KEK 79), fuel supply (RWC Hidromorava80 , ICMM81), among others.

PUBLIC ENTERPRISES

NO.OF CONTRACTS

KEK

5

PTK

3

RWC Hidroregjioni Prizren

1

RWC Bifurkacioni Ferizaj

1

RWC Hidromorava Gjilan

2

Waste managment company

1

Pastrimi Comapany

1

Tab 14 Number of no value contracts by public enterprises

76 Public Procurement Regulatory Commission. http://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=84018 77 Public Procurement Regulatory Commission. https://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=89002 78 Public Procurement Regulatory Commission. http://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=82472, https://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=94434 and https://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=94434 79 Public Procurement Regulatory Commission. https://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=94748 and http://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=82797 80 Public Procurement Regulatory Commission. http://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=82510 and http://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=84269 81 http://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=82289

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Contracting services and supplies in dollars Although legislation in effect requires use of Euros as the only currency, we have noticed use of dollars in contracting services and supplies by PTK and Trepca. While according to Law on Public Procurement, contract value should be given only in Euro, not other currencies.82 Trepca Enterprise in Zvecan, under KPA administration, awarded a contract83 for supply with equipment and training. The amount of equipment supply has been calculated in Euros, EUR 13,465, while tender on training has been calculated in dollars, USD 31,919. Namely two currencies have been used in the same contract. Post and Telecommunication of Kosovo also used dollars in the tender “Diesel from Platts” at the value of USD 19,700. 84

Highest price vs. lowest price A huge difference has been noticed between bids for various services. Termokos in a case of the supply with filters contracted the lowest bidder at the value EUR 16,150, while the highest bid was EUR 53,400, or four times higher. 85 Infrakos had two similar tenders, one of EUR 557, while the highest bid was EUR 4.020, or seven times higher.86 The other contract is of EUR 9,405, while highest bid was EUR 27,500 or three times higher.87 Cases of abnormally low prices raise suspicion 82 According to LPP no. 04/L-042, article 12 paragraph states: all prices and values specified in any public contract, any tender dossier, notice or invitation to tender or participate shall be stated, and all payments with respect thereto shall be required to be made, in Euro. 83 Public Procurement Regulatory Commission. http://krpp. rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=82477 84 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=94181 85 https://krpp.rks-gov.net/Default. aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=94620 86 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=92998 87 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=88394

of low quality of services or supplies. Small tenders - avoiding open procedures A phenomenon has been spotted with the Regional Waste Company “Ambienti” in Peja, where four different fuel supply contracts exist with one single company. This enterprise has four small quotation contracts with same description - “Fuel supply” contracted for short timeframes, entered into on 30 January88 , 30 May 89, 28 August90 and 8 December91 2014. All contracts have been concluded with the “Kastrati” Company, with total annual amount of EUR 37,887. “Ambienti” has also contracted Delta Group for supply of diesel and gasoline at the amount of EUR 181,440.92 This raises suspicion of avoiding open tendering procedure, through signing of smaller contracts with the same company, thus suffocating competition, which is a violation of the law on procurement, namely same goods may not be split in smaller contracts.93 Same occurrence has been noticed with PTK’s mobile phone supply contract. This public enterprise concluded seven smaller quotation contracts under the same title - “supply with mobile phones”, with total amount of EUR 38,830. On the other hand, PTK signed two cell phone supply contracts for PTK consumers. One quotation amount is EUR 4,200, and the other is medium sized, EUR 26,740.

88 Public Procurement Regulatory Commission. http://krpp. rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=81652 89 Public Procurement Regulatory Commission. http://krpp. rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=85962 90 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=89602 91 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=94052 92 Public Procurement Regulatory Commission. https:// krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=1&CtlID=ViewNotices&ID=88737 93 Article 18 paragraph 5 of LPP states: A contracting authority shall not split up a work or a works contract for the purpose of lowering the value of a work or works contract below a threshold specified in Article 19 of this law.

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Tender corruption suspicion The Special Prosecution of Republic of Kosovo has filed an indictment against the PRB chairperson, Hysni Hoxha, internal expert of PRB, Hysni Muhadri, and owner and accountant of Conex Group, Veton Fetahu, respectively Arsim Robelli. PRB officials are accused of “abuse of power or official authorization”, while officials of economic operators are accused of “document forging, fraud and false statement under oath”. This case relates to the tender on building a business premises at Pejton Place, initiated by the Public Housing Enterprise in Prishtina. 94 In April 2014, “Security Code”, joint venture of former close protection and nephew of Sami Lushtaku, Mayor of Skenderaj, re-won the million-euro tender for security at Privatization Agency of Kosovo premises95 . Contract to this company has also been criticized by the Office of the Auditor General because “Security Code” has been paid for work that was not performed as stipulated by the contract. Another large tender described as faulty, based on an investigation by Gazeta Jeta ne Kosove, since 2012, was the tender for providing security for premises of Energy Corporation of Kosovo. For this case, on 16 January 2015 an indictment has been filed by EULEX against the director and procurement official of KEK, chair of PRB and heads of the company in question.96 As a result of monitoring, in early 2014, Gazeta Jeta ne Kosove reported on a 5 million Euros contract for repair of turbines and electric generators of Kosova A plant97. This contract was expected to be signed by KEK, which announced the winner as a consortium including “Power Machines”, owned by Russian billionaire Alexey Mordashov, a person known to be close 94 Special Prosecution of Kosovo. Press release. 4 December 2014 95 Gazeta Jeta ne Kosove. Million Euros worth tender for former close protection and nephew of Sami Lushtakut, Gazeta Jeta ne Kosove, 21 Prill 2014 - http://www.gazetajnk.com/?cid=1,987,8061 96 Gazeta Jeta ne Kosove. 16 January 2015. Gjukaj said that he found out on indictment against him from the media. http://live.kallxo.com/ sq/MTL/Gjukaj-Thote-se-nga-Mediet-Mori-Vesh-per-Aktakuzen-4143 97 Gazeta Jeta ne Kosove. The oligarch related to Putin, wins KEK tenders, Gazeta Jeta ne Kosove, 2 April 2014 - http://gazetajnk. com/?cid=1%2C1018%2C7948

Vladimir Putin, though a year ago the company has been removed from the tender on suspicion on price fixing. Senior KEK officials stressed that this lowest qualified bid made the consortium win the tender. Because the contract is of high significance for public opinion, Gazeta Jeta ne Kosove continued carefully following this tender. In April 2014, Gazeta Jeta ne Kosove reported that Power Machines did not win the tender of over 5 million Euros, because the process has returned to retendering by the Procurement Review Body.98 Disputable tenders took place in PTK public enterprise too. 99 This enterprise has awarded large tenders to a Croatian company branch in Kosovo twice in two years. PTK declared “Altima” Company winner of negotiated tender, which is managed by the son of a business partner of Ejup Qerimi, PTK CEO. Another problematic tender was launching of 3G Internet after several complaints of a company, owned by an Albanian businessman from New Jersey.100 This delay prolonged introduction of 3G services by PTK. On the other hand, its strongest competitor in the industry, IPKO, reported increasing number of clients. Complaints in PRB were pending for quite long in absence of PRB Board; however the tender was finalized at the end of the year and PTK launched the service. Another problem was noticed at Prishtina International Airport with unfinished works in 98 Gazeta Jeta ne Kosove. Tender won by the Russian oligarch in KEK, cancelled, Gazeta Jeta ne Kosove, 2 April 2014 - http://gazetajnk. com/?cid=1%2C1018%2C7948 99 Gazeta Jeta ne Kosove. Negotiated million - Gazeta Jeta ne Kosove, 7 July 2014 - http://www.gazetajnk.com/?cid=1,987,8622 100 Gazeta Jeta ne Kosove. Mysterious complaint and absence of 3G by VALA – Gazeta Jeta ne Kosove, 31 March 2014 - http://www. gazetajnk.com/index.php/kulture/repository/images/path/felloeship. birn.eu.com?cid=1,987,7926

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the new terminal, due to poor planning and oversight by the Kosovo Government. The Government Oversight Committee rarely met — only once per year — despite the regulation that requires the Committee met every month of the year. 101

MINISTRIES Ministries and other executive bodies are established, as needed, for performing functions within competencies of the Government102 . This category includes 19 contracting authorities, respectively Ministries whose public procurement documents were analysed by BIRN, starting from tender announcement, award announcement and cancellation prior to awarding the contract, and cancellation by PRB after announcement of award.

Tab 15 Number and percentage of published announcements Out of 1,087 published contract announcements, 264 were cancelled before awarding the contract due to the following reasons. Ministry of Infrastructure has most of cancellations, respectively 39; Ministry of Interior 30; Ministry of Health 27; while the ministry with least cancellations is the Ministry of Foreign Affairs, with only two.

101 Gazeta Jeta ne Kosove. Airport - Great neglect by Ministers of Thaci, Gazeta Jeta ne Kosove, 3 November 2014 - http://www.gazetajnk.com/index. php?cid=1,987,9349 102 The Constitution of the Republic of Kosovo, article 96, Point 1

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Cancellation reasons were different, grouped as following: a) Non-responsive tenders103 – 132 cases cancelled because of non-responsive tenders of economic operators. b) Opinions of Anti-Corruption Agency - in 11 cases involving ministries, the Anti-Corruption Agency issued procurement cancellation opinions. However, cancellation announcements published by ministries do not stress that this was done due to opinions of ACA. Their announcements indicate that the reasons for cancellation were circumstances other than contracting authority, violation of procurement law, among others. c) Lack of detailed completion of standard forms - 96 cases of cancellation do not specify the reasons for cancelling announcements, although contracting authorities are legally bound. The form only indicates that the cancellation was done due to violation of the procurement law. d) Substantially in excess of the budget - given reasons for cancellation of 19 tenders state that bids of economic operators were higher than budget planned by the contracting authority. Detailed information has been presented in the following table:

Tab 16 Number and percentage of published cancellations Based on the official website of PPRC, respectively out of 738 award notices, small value contracts are predominant with 341 contracts, followed by medium size contracts - 275. There are 122 large contracts with over EUR 500,000, mainly awarded by the Ministry of Infrastructure.

103 According to public procurement law, non-responsive tenders are considered all tenders that are not in compliance with a) the tender dossier, including technical and contractual requirements, b) requirements of relevant legislation of Kosovo or that are c) otherwise incapable of meeting the requirements of the contracting authority as specified in the tender dossier. Law on Public Procurement, p. 7. http://www.kuvendikosoves.org/common/docs/ligjet/Ligji%20per%20prokurimin%20publik.pdf

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Tab 17 Classification of contracts by value Abnormally low price Veneta Travel got the tender of the Ministry of Education, Science and Technology titled “Air travel services”, bidding abnormally low — 103 per cent less than other bidders and market price. The same company was awarded the contract with a price of -2.30 Euros per unit of the “Air travel services” tender initiated by the Ministry of Diaspora. Based on such prices, this company offered travel services with loss for these two contracting authorities. Ministry of Kosovo Security Force on the website of PPRC published the tender cancellation announcement after awarding the contract “Construction of garages for Engineer Battalion in Prishtina barracks”104. This tender was awarded to “Arhiko” on 17 December 2013 for EUR 398,302, but because of the appeal to PRB, the contract was cancelled. Three months later, on 28 March 2014, PRB responded to MKSF that in absence of board for long time, this case was not reviewed due to exceeding legal timelines for reviewing appeals. Regarding this issue, the Director of Procurement Department, Afrim Maxhuni105 said: “After receiving the response from PRB, we cancelled the procurement activity, which caused double harm to us, the budget of this project has been cancelled, and we were delayed during implementation of works, thus this project has been postponed for 2015-2016”.

Discrimination and non-transparency Contracting authorities often violate article 7 of LPP, which provides for equality and non-discrimination. This phenomenon was noticed at the Ministry of Finance and Ministry of Foreign Affairs, who in their tenders for car washing and vehicle service, limited the distance of economic operators to 3, respectively 10 km from Ministry premises, which is in contradiction with the Procurement Law.Even the contract announcement for the tender for construction of primary school in Mitrovica, the requirements on financial and economic situation, and technical and professional requirements were considered discriminatory and eliminate free competitiveness, thus favour certain economic operators.106 104 Public Procurement Regulatory Commission. https://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=84678 105 Interview with Afrim Maxhuni, Director of Procurement and Contracts Department, Ministry of Kosovo Security Force, 20 January 2014 Science and Technology in the tender “Construction of primary school in Mitrovica” procurement no. 208-13-068-511 106 Opinion of ACA: Ministry of Finance, tender “Car-wash services for Ministry of Finance” procurement no. 2011-140-7236, Ministry of Justice, tender “Servicing and maintenance of MoJ vehicles in Prishtina (MoJ, SHKK, AAPSK) no. Procurement: 21500/14/001/221, Ministry of Education,

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Other

Ministry of Local Government Administration has been fined by PRB with EUR 20,000107, while procurement office manager, who lost her certificate, and was moved to another workplace. This occurred after the appeal of economic operator “Astraplan” because of the expiration of the bid (bid became invalid three days before the re-evaluation committee issued the decision) while procurement office did not request extension of validity of bids by economic operators.108

Politics in procurement In May 2014, Ministry of the Kosovo Security Force signed a framework contract for 24 months with KATANA Company for EUR 500,000 to supply ammunition. Xhafer Gashi, Mayor of Obiliq municipality, owns shares in this company. Gashi was in charge of the security of current Minister of Security Force, Agim Ceku, while the latter was Prime Minister. 109 Corruption suspicion in public procurement The biometric passport scandal was among the biggest in recent two years. This tender was initiated in February 2011 when tender was opened, while in May same year, “Osterreichische Staatsdruckerei”, OeSD, was declared the winner. The tender’s value was 4,127,324 Euros. Problems were noticed after a year, while Natali Velija, owner of the company “EU Consulting” did not transfer money to the account of OESD, which she represented in Kosovo. Veliaj and her accomplice Fisnik Blakaj were charged for disseminating money through a network of private construction companies that did not pay taxes to the government. On 18 December 2014, indictment was confirmed against Veliaj, Blakaj, Nazmi Thaci, Jakup Blakcori and Sefedin Shala. Veliaj was sentenced to 12 years in prison, fined EUR 25,000, while her apartment was 107 Public Procurement Review Body. http://oshp.rks-gov.net/repository/docs/vendimet/2014/44-14-vend-.pdf 108 Interview with Besnik Osmani, MLGA Secretary, 11 November 2014. 109 Gazeta Jeta ne Kosove. August 2014. Millions poured to the company of a trusted man. http://www.gazetajnk.com/index. php?cid=1,987,8888

seized. Blakaj was sentenced to 11 years in prison and fined 25,000. Also found guilty were: Betim Blakaj, Ergyn Dogani, Ymer Fazlia, Nazmi Thaci, Jakup Blakcori and Sefedin Shala. The accused were found guilty on the following counts: Organized crime, money laundering, fraud, tax evasion and abuse of trust. Ministry of Internal Affairs faces another criminal procedure. On 15 January 2015 the Special Prosecution of Kosovo filed an indictment against five people suspected of committing criminal acts in 2014, including organized crime, supply, transportation, exchange and unauthorized sale of weapons, fraud and abuse of official power. Confirmed by EULEX, this allegedly involved three ministry officials and two businessmen. Arrested businessmen were Armend Selimi and Astrit Pira from “Friends” Company and Xhevahire Vatovci, Kadrush Koliqi and Ragip Bunjaku of the ministry. Moreover, Gazeta Jeta ne Kosove had reported in the past years that the company of Armend Selimi, although under investigations, won the tender in KIA and Kosovo Police110. Furthermore, his company was not responsible in implementing contracts, thus Kosovo Police was not supplied with weapons even 23 months after concluding the contract111. The case is under criminal prosecution by an international prosecutor of SPRK.112 Late 2014, the “Justice in Kosovo” TV show investigated the case on how former Minister of Justice, Ferid Agani, signed the contract with the company “NTP Friends” for the supply of medical supplies and equipment for the needs of essential drug list. 110 Gazeta Jeta ne Kosove. 21 October 2013. Suspected businessman wins tenders from KIA and Police. http://gazetajnk. com/?cid=1,987,6715 111 Gazeta Jeta ne Kosove. 8 July 2013. Police waiting for the company, which is under investigation, to execute the contract. http:// gazetajnk.com/?cid=1,987,5984 112 Kallxo.com. Who are the five accused regarding weapons tender? www.kallxo.com, 20 January 2015 http://live.kallxo.com/sq/MTL/Kush-Jane-Pese-te-Akuzuarit-RrethTenderit-Per-Arme-4204

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NTP Friends was suspected for fraudulently meeting tender requirements. Nevertheless, this tender went through all state procurement filters. The company, according to database of “Company House,” which registers businesses in the UK, was registered three months after it applied in tender through its Kosovo partner “Friends”. 113 Ekrem Maliqi, Berat Murmullaku, Bekim Fusha and Hajrullah Fejza were involved in the tender - all former officials of the Ministry of Health. They are accused of abuse in the tender for supplying essential medication in 2010. Murmullaku, Fusha and Fejza were also members of this tender evaluation committee. They are accused of abusing with power or official position, because they are suspected of violating tendering procedures. Maliqi is facing same charges because he declared the recommended company by the committee the winner of the tender. In October 2014, Gazeta Jeta ne Kosove reported about a company overseeing highway construction114. This investigation noticed that the US-Turkish consortium Bechtel-Enka is being supervised in the construction of the Prishtina-Hani Elezit highway by the same firm that oversaw the consortium for the Kosovo-Albania highway. The US company Hill International – managed by former Bechtel employees — won the tender for supervising the construction of roads. Another operator, Louis Berget, competing for the tender, appealed to the Public Procurement Review Body, alleging that Hill International did not meet requirements, and that the Ministry of Infrastructure selected that company unjustly.

reported that the company hired for maintenance of government buildings has problems with the law. Based on two indictments filed against Xhemajl Duraku, owner of the company “Dolphin”115, he is charged with tax evasion and forging documents. The company is located in the basement of the Kosovo Government Building and is suspected for forging documents in the maintenance tender, which includes the Prime Minister’s Office. While monitoring public procurement, BIRN found that the Ministry of Infrastructure contracted non-responsive companies. An internal audit report of the Ministry of Infrastructure indicates legal violations in this tender by the Ministry of Infrastructure. For the tender of Prishtina A, the audit focused on total 1,918 km of regional and national roads in amount of 15 million Euros, while 10 different companies were hired. For Prishtina A, the tender was awarded to “Arbotec” company in amount of approximately EUR 1.3 million, while audit shows that project manager for this region had no summer or winter maintenance project experience stated in the CV or references of the company, as required by the tender dossier. The same company was rejected in lot 4 because of absence of documents, on the section on technical capabilities and professional skills116.

In late March 2014, Gazeta Jeta ne Kosove 113 Drejtesia ne Kosove, program “Dosja F”, 12 December 2014 http://www.drejtesianekosove.com/sq/Emisione/Emision-Drejtesiane-Kosove-DOSJA-F-1262 114 Gazeta Jeta ne Kosove. Highways supervised by former Bechtel workers, Gazeta Jeta ne Kosove, 7 October 2014 http://gazetajnk.com/ index.php?cid=1%2C987%2C9212

115 Gazeta Jeta ne Kosove. The company maintaining the Prime Minister’s Office is accused of fraud, Gazeta Jeta ne Kosove, 24 March 2014 - http://gazetajnk.com/index.php?cid=1%2C987%2C7871 116 Koha Ditore. http://koha.net/?id=27&l=1058

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Major capital projects Kosova e Re: According to Kosovo energy strategy, the tender for construction of Kosova e Re power plant was planned to go through competing tender. On 19 December 2014, the Kosovo Government, respectively the Project Steering Committee, decided to continue tendering, although only one pre-qualified bidder remained. Civil Society Organizations criticized the extension of the tender with only one company, referring to the Law on Public Procurement, which requires at least two responsive companies in one tender. This action prompted a response of Robert Bosch, Dutch Ambassador to Kosovo. He worked as procurement official in Dutch Government and had procurement trainings provided by World Bank. He said that it is not the practice of World Bank to apply negotiated procedures in a tender that had never been cancelled. The Project Steering Committee argued that the concerned tender followed World Bank procedures, which allows such a practice. The World Bank responded to BIRN, stating that the tender for power plant was done in line with Kosovo laws. The World Bank in this process plays the role of Partial Risk Guarantor, which means that bank shall make sure that the Government is meeting obligations towards private investors. The Kosovo public is still puzzled about the obligations Kosovo will have private investors in building the power plant. It is worth mentioning that through World Bank procurement procedures, in case Kosovo government is borrower in this organization, article 1.2 states that implementation, granting the contract and project administration, is under the responsibility of the borrower. Brezovica - Silently, as it happened in the PTK privatization process, the Inter-ministerial Committee on 18 November 2014 received the recommendation of foreign experts on the best offer for investments in the renowned tourist destination, Brezovica. Committee had stated that the recommendation of USAID ex-

perts on best bid was received — namely a French consortium bidding 410 million Euros was positively assessed. According to the Committee, over 35 km of ski tracks will be built in the first stage, with seven ski lifts. It will also be equipped for summer tourism. Prishtina – Hani i Elezit Highway – Former Minister of Infrastructure Fehmi Mujota on 4 July 2014 notified his then boss, Prime Minister Hashim Thaci that the contract was ready for the “Bechtel & Enka” consortium for the construction of Prishtina – Hani i Elezit Highway, a town near the border with Macedonia, which will cost EUR 600 million. Two international consortiums: “Bechtel & Enka” (US-Turkey) and “CMC-Dogus” (Turkey-Italy) bid for the highway construction. In April 2014, Gazeta Jeta ne Kosove published its investigation on the Kosovo-Albania highway, presenting for the first time how lobbying, poor planning, “tenders without competition” , the failure to set the price cap and inflated prices have left Kosovo taxpayers with a bill of close to a billion euros for only 77 kilometres of highway. Gazeta Jeta ne Kosove has also published another investigation about the highway and lobbying of the US Ambassador Christopher Dell, who has opposed the proposals of the EU officials that the contract with “Bechtel & Enka” should not be signed because it was not in Kosovo’s favour. Dell took the role as director for Bechtel in the African country of Mozambique last year, several months after the end of his 30-year career at the State Department.

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OFFICE OF THE PRIME MINISTER Office of the Prime Minister of Kosovo has held several public procurement activities during 2014 totalling approximately EUR 628,728:

Tab 18 Number and percentage of published announcements In this institution, of 31 announcements for contracts, 9 of them were cancelled prior to the award. Cancellation was made based on the following reasons: a) Non-responsive tenders117 – in 7 cases or 78 per cent of them, cancellations were made on the grounds that economic operators have submitted nonresponsive tenders. b) Lack of detailed completion of standard forms – in two cases detailed reasons of cancellation of announcements were not provided although the contracting authorities are obliged to do so. The form only indicates that the cancellation was done because of violations of law.

117 According to the Law on public procurement, tender bids are considering nonresponsive which do not comply with a) tender dossier, including technical and contractual requirements, b) relevant legal requirements or who c) do not meet requirements of contracting authorities as specified in the tender dossier. Law on public procurement, page 7. http://www.kuvendikosoves.org/common/docs/ligjet/Ligji%20per%20prokurimin%20publik. pdf

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Tab 19 Number and percentage of published cancellations On the official website of the PPRC, the Office of Prime Minister has published 40 announcements of award of contracts at the amount of EUR 628,728 according to the table below:

Tab 20 Classification of contracts by value The Office of the Prime Minister has four smaller contracts with the same title of the contract “Supply of various goods of Information Technology” in short periods of time, respectively on 4 April118 , 7 May 119, 7 July120 and 10 December121 2014, which amounted to EUR 24,590. The contract is not done in the framework of having multiple operators and could have been encompassed into a single contract. According to the Law on Public Procurement, this is a violation of the law. 118 Public Procurement Regulatory Commission. http://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=83666 119 Public Procurement Regulatory Commission. http://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=84917 120 Public Procurement Regulatory Commission. https://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=87601 121 Public Procurement Regulatory Commission. https://krpp.rks-gov.net/Default.aspx?PID=Notices&LID=1&PCID=-1&CtlID=ViewNotices&ID=94183

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Assembly of the Republic of Kosovo

Similar to other institutions, BIRN has analysed public procurement materials for this institution from the notification process to the cancellation after announcing the contract award notice.

Tab 21 Number and percentage of published notices The table below shows that 38 announcements for cancellation that the Assembly had during this period were mainly due to the following reasons: a) Non-responsive tenders - 27 cases of cancellation were made on the grounds that economic operators have submitted Non-responsive tenders. b) Opinions of the ACA – in one case cancellation of the procurement activity was recommended. c) Lack of detailed completion of standard forms - In 10 cases there was no detailed completion of reasons for the cancellation of the tender; d) Substantial excess of the budget - In seven cases economic operators have exceeded budget possibilities of contracting authorities.

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Tab 22 Number and percentage of cancellations The Assembly of the Republic of Kosovo has published a total of 34 contract award announcements, which amount to EUR 1,490,860 planned to be spent during 2014.

Tab 23 Classification of contracts by value Among tenders contracted by this institution was that of purchase of tablets for Members of the Assembly. The purchase of tablets was done through a single source tender, consequently eliminating competition as a key pillar of the Law on Public Procurement. For the purchase of 140 tablets and other accessory equipment, the Assembly would pay EUR 111,860.122 One iPad was to cost EUR 620 and the tender was won by the INFO Com Company in Kosovo.123 During this year, the Procurement Review Body for more than ten times dealt with the legality of the procurement activities of the Assembly of Kosovo. The Anti-Corruption Agency has also has addressed to the Assembly of Kosovo problems regarding the tender “Renovation of the building of the Assembly of the Republic of Kosovo”. In relation to this tender, the ACA considered that the actions of the contracting authority are not in compliance with the Law on public procurement and recommended cancellation of this procurement activity. 124 122 Koha Ditore. The Assembly purchases 140 iPads without a public tender, Koha.net, February 2014 http://koha.net/index-28.11.2014.php?id=27&l=35431 123 Reply received via email from Xhemail Halili, Director of the Directorate for Procurement in the Assembly of Kosovo for the tender “Supply with equipment for mobile communication for access to E-Parliament system, in the Assembly of the Republic of Kosovo”. 26 January 2015 124 Opinion of the Kosovo Anti – Corruption Agency, May 2014 - http://akk-ks.org/repository/docs/opinion%20-Kuvendi%20i%20Republikes%20 se%20Kosoves.pdf

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The Assembly also faced accusations because it recommended the “TeknoIng Consulting” Company, which had offered higher than the set limit. On the other hand, according to Ismet Krasniqi, Secretary of the Assembly, this procedure was cancelled, respecting the opinion of the AC, which had objections to the technical specification due to the mentioning of the manufacturer. But, according to Krasniqi, the Procurement Office had mentioned the manufacturer, but it had created space to “bid with equivalent products, provided they have at least the same quality of product required by the Contracting Authority.”125 This opinion of the ACA has contributed to the preservation of free and fair competition by leaving no room for favouritism of a manufacturer during this tender. BIRN has found that the Kosovo Assembly has not done proper planning of expenditure in case of the tender for “servicing and maintenance of Mercedes Benz vehicles”. The administration of the Assembly of Kosovo has planned in the notice of framework contract to pay for this service an amount of EUR 10,000, while it agreed to sign a contract in the amount of EUR 344,532. This was the lowest bid in the tender. The number of vehicles to be serviced was five and offers of economic operators have been per unit126. OFFICE OF THE PRESIDENT During the monitoring, BIRN noticed that in comparison with other institutions monitored, the Office of the President of the Republic of Kosovo had fewer tendering activities. During the monitoring of procurement procedures at the Office of the President, BIRN analysed materials from the process of their notification to the cancellation by the PRB after the announcement of the contract award notice.

Tab 24 Number and percentage of the published announcements

125 Reply received via email from Ismet Krasniqi, Secretary of the Assembly of Kosovo. 12 November 2014. 126 Reply received via email from Xhemail Halili, Director of the Directorate for Procurement in the Assembly of Kosovo for the tender “Servicing and maintenance of Mercedes Benz vehicles”. 26 January 2015.

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The Office of the President published a total of 29 contract award announcements, which amounted to EUR 226,100 planned to be spent during 2014. Of these only one was cancelled before the announcement of the contract award notice, and which contains no detailed data about the reason for cancellation. Given that the Office of the President has no capital investments, the majority of contracts of this institution are of low value - excluding only three contracts, which fall into the medium value category, totalling around EUR 68,623. However, in 2013, the Office of the President contracted the DPZ “Auto – Toplica” Company to perform polishing services for the Office of the President vehicles. The contract with this company had a value of EUR 9,030. The same company won a similar tender in 2014. Last year’s contract entered into with this company has a value of EUR 9,220. This company offered an approximately same price in two years although in 2014 it was contracted for an additional service, respectively maintenance with the same price of EUR 9,030. This leaves room to suspect that the company either offered a higher price in 2013 or an abnormally low price in 2014, which may lead to a poor quality of service provided. Staff and monitoring of public contracts Preparation of staff working in public procurement While monitoring the work of institutions related to procurement, BIRN has noted that there is a lack of accountability of procurement officials in the completion of tender dossiers materials. Thus, as discussed in the preceding chapters, procurement officials in the preparation of award announcements in some cases have not set approximate values of contracts and have put technical specifications which were in fa-

vour of some technical operators while discriminating against other operators. Furthermore, the contract cancellation announcements lacked detailed explanations for the reasons that have led to the cancellation of contracts, and which could serve as a lesson learned for economic operators not to repeat the same mistakes. The institution that trains and certifies procurement officials, KIPA, prepares these officials through two training modules, namely the basic and advanced module, and currently in Kosovo there are 587 certified officials, of whom 576 with advanced certificate and 11 basic certification. 127 However, although there are times when due to the fault of procurement officials, economic operators were discriminated against and there was no transparency according PRB decisions — cases that then were returned for evaluation. Meanwhile, this institution has reprimanded only two procurement officials by revoking their certification. Thus, only one former procurement official of the MED in 2011 and former procurement manager in MLGA, had their procurement professional licenses revoked. Monitoring and revision of public contracts PPRC, the institution that is responsible for monitoring the work of the offices/departments and divisions of public procurement, has a lack of staff to meet this obligation. This has forced PPRC to monitor only large value contracts before publication on their website, while the majority of contracting authorities have tenders of mostly medium and small value. PPRC has for several years now requested from the Assembly of Kosovo to increase the budget of this institution so that it can fulfil its legal obligations. The Public Procurement Regulatory Body — 127 Interview with Buraj Thaci, Acting General Director of KIPA. January 21, 2015.

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also known as the “The Court of Tenders” — which handles complaints regarding public contracts, has been without a Board of Directors for over six months. As a result more than 200 complaints were not reviewed during that period for tenders totalling more than EUR 52 million.128 PRB is the main body that decides on the legality and regularity of public contracts in all appeals against contracting authorities and economic operators. Thus, the PRB is the only body that has the obligation to create and update the Black List of economic operators, which currently is empty. This list is created by PRB at the request of the contracting authorities. Unfortunately, BIRN has noted that there are companies that place nonresponsive bids, with abnormally low prices. However, the PRB has not entered any company in this list for 2014, whereas, in 2013 the EuroTrade Company was inserted in the list at the request of Prishtina International Airport for a period of four months. In total so far only three companies have been on the list. 129 According to the PRB, the law not only provides punitive measures for economic operators, but also for contracting authorities, particularly for operators that submit unfounded complaints. Enforcing compliance with these penalties totalling EUR 5,000 and above depending on the violation of the law will discipline economic operators to be more responsible and rational in the preparation of tender dossiers but also in filing complaints130 . However, it is worth noting that the President of PRB and an internal expert have indictments against them on suspicion of misuse of official position relating to a tender of the Housing Company in Prishtina.

128 Gazeta Jeta ne Kosove. Appeals at the amount of 52-million not being reviewed by PRB. http://gazetajnk.com/?cid=1,987,7513 129 Procurement Review Body. Black List. http://oshp.rks-gov. net/?cid=1,120 130 Interview with Hysni Hoxha, Head of the PRB. October 27, 2014.

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CONCLUSIONS Public procurement in Kosovo faces various challenges, ranging from the technical, inadequate budget planning to political interference and corruption charges. Thus, according to this report, there is a lack of adequate planning of costs, preparation of tender dossiers and finalization of contract award. Therefore, the contracting authorities have exceeded budget projections in some cases up to thousands of euros, and on the other hand due to improper planning and debt a part of projects could not have been carried out. Also, it was noted that the contracting authorities, in order to avoid open competition, in some cases contract services for short periods of time (several smaller contracts annually with the same company and the same service) in the category of small quotation contracts, which are not openly tendered and therefore not supervised by the PPRC. Moreover, it was observed that in some cases the evaluation committees of tender bids are created just for show and are close to the procure-

ment manager, and not necessarily have a sound knowledge of the relevant field for the tender in question. Lack of transparency persists, particularly in the awarding of contracts for capital projects with great financial values and that are vital for the country. This is where a rigorous supervision by the PPRC is lacking. Proper supervision together with more severe penalties by the PR would serve to institutions and other officials not to repeat the same mistakes. Perceptions of corruption and politicization in this sector are based on numerous proven cases of illegal awarding of tenders, which damage Kosovo’s budget, and political involvement. Thus, in a large number of institutions, particularly in municipalities, there are a number of officials who are accused by the prosecution of criminal offences related to public procurement and are awaiting trial. In general, Kosovo’s Special Prosecution has worked on 23 cases with a total of 186 accused people, that dealt exclusively with allegations of misuse of tenders.

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RECOMMENDATIONS To improve the situation of public procurement, public institutions of Kosovo should take the following steps: Government and Assembly of Kosovo: — Immediate initiation of electronic procurement as an element of transparency and preservation of public spending, facilitation and economization of procedures. — Amendment of the Law on Public Procurement in general, with an administrative instruction in the interim concerning the selection of tenders based on the price per unit. — Possibility to foresee the availability of funds for certain project with a margin of appreciation from -10 per cent to +10 per cent. — Increase the budget for PPRC, which will enable the expansion of human capacity to improve monitoring of tender dossiers. — Ministry of Finance to review and approve the List of Items for which the CPA makes a request to develop centralized procurement procedures for contracting authorities. Contracting authorities: — Apply the steps provided in the law for all tendering procedures; — Allow the participation of certain groups — including NGOs — in tender evaluation procedures based on a mutual agreement with rights and obligations. — Avoid where possible small quotation contracts that reduce competition, which could lead to better services. — Avoid technical specifications in contract announcements that favour some economic operators and deter others from the competition. — Technical specifications to be drafted in cooperation with procurement offices and documents, with needs to be specified transparently in of all these requirements. — Avoid the influence of politics in public pro

curement, the appointment of procurement officials, appointment of the evaluation commissions and in determining the winners of tenders. — Suspend procurement officials who have open cases in the courts of Kosovo. — Request the inclusion in the black list irresponsible economic operators who do not fulfil contractual obligations. — Evaluation Committee members must have relevant knowledge for the field in which they do procurement. — Commissions for technical acceptance - procurement offices to be fully engaged in these commissions and in enforcing contracts. — Take into account the opinions of the AntiCorruption Agency and to note in the reasons for cancellation of the contract whether the opinion of the ACA was considered or not; — Consider reports of the Auditor General and not to repeat the same mistakes year after year. PPRC: — Conduct rigorous monitoring of public procurement across Kosovo. — Check notices for contracts prior to their publication in order to avoid technical errors. PRB: — Impose more severe penalties on contracting authorities that have frequent problems with tenders. — Punish economic operators that make nonresponsive and irrational bids, and blacklist them. — All officials of the PRB who have indictments should resign from their posts. KIPA: — Strengthen the criteria for persons who undertake basic and advanced training for professional certification in procurement. CPA: — Continuous update of price indexes and its online publication ;

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Balkan Investigative Reporting Network - BIRN (Kosovo) Mensa e Studentëve, kati i parë, 10 000 Prishtinë, Kosovë Tel. & Fax: +381 38 22 44 98 E-mail: [email protected] Web: http://www.birn.eu.com

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